Thu October 29, 2009
Pre-paid college tuition programs face deficits
By Lisa Autry
Frankfort, KY – In the last 2 decades, families around the country have invested in state funds that pledge to cover college costs, regardless of how much tuition increases. The so-called 529 funds allow parents to pay future tuition costs at today's lower prices. But now, most state-run programs are in the red. Kentucky Public Radio's Lisa Autry has this report.
Eighteen states, including Kentucky, offer families the chance to pay
current tuition costs for college in the future. Jo Carol Ellis is with
the Kentucky higher education assistance authority. She says a
combination of factors have many prepaid college tuition programs facing
Kentucky has closed its prepaid tuition program to new applicants since
2004. It has an actuarial deficit of 59-million dollars, though
officials say the fund, as it is today, is solvent.
The weak stock market and rising college costs have prepaid college
tuition programs in the red. The state funds allow families to pay
future tuition costs at today's lower prices. Kentucky's prepaid
tuition program has been closed to new enrollees since 2004. WKU
economics professor Brian Strow thinks more of these programs will close
to new investments.
Like most states, Kentucky's program has an actuarial deficit. Should
Kentucky's prepaid tuition program run out of money, it is backed by the
state's unclaimed property fund.